Watchdogs: A Hard Look at Healthcare Middlemen

1 year ago

0 Comments Say Something »

Text Size

Contributor

As part of the effort to revive the health care reform package, the U.S. Senate may soon step up attempts to end the longstanding antitrust protections afforded the insurance industry. Now, insurers aren't the only business whose antitrust privileges are coming under close scrutiny on Capitol Hill. A bipartisan band of senators is turning to an inquiry into the billions of dollars a year gained by inventory middlemen known as Group Purchasing Organizations that supply health care institutions and hospitals with medical devices and equipment.
GPOs purchase medical supplies for hospitals around the country, charging the hospitals lucrative administrative fees in return for their middlemen services. Like insurance companies, the purchasing conglomerates enjoy many legal exemptions from antitrust restrictions.

A number of senators, including Bill Nelson (D-Fla.), Charles Grassley (R-Iowa) and Herb Kohl (D-Wis.) have asked their staffs to investigate why some of the country's smaller medical device companies complain about not being able to compete as suppliers to the GPO-dominated market. The senators also want to look at criticisms that the GPO system lacks transparency and, according to one Hill investigator, might be "rigged."

One current business regulation theory is that purchasing organizations save money for the health care system because their exemptions allow them to buy and then re-sell to hospitals at a cheaper cost than if the GPOs were subject to broad market of competition. Senate investigators are gathering documents and doing interviews. Expect an oversight hearing early this spring to focus on the antitrust exemptions afforded these middlemen purchasers.

Similar antitrust exemptions enjoyed by the insurance industry due to the McCarran-Ferguson Act have been fought over in Congress since the law was enacted in 1945. Those antitrust exemptions have become part of the Obama-generated debate on health care reform.

Currently, the giant insurance companies are regulated primarily at the state level by individual insurance commissions. While most states' insurance commissions have severely limited power over the insurance companies domiciled in their states, serving on the commissions is often a stepping stone to higher political office. For example, Obama's Secretary of Health and Human Services Kathleen Sebelius went from being a state legislator to being the state insurance commissioner before becoming governor of Kansas.

Filed Under: Senate, Democrats, Republicans, Economy, Investigations, Health Care, Obama Administration, PD Investigations

Our New Approach to Comments

In an effort to encourage the same level of civil dialogue among Politics Daily’s readers that we expect of our writers – a “civilogue,” to use the term coined by PD’s Jeffrey Weiss – we are requiring commenters to use their AOL or AIM screen names to submit a comment, and we are reading all comments before publishing them. Personal attacks (on writers, other readers, Nancy Pelosi, George W. Bush, or anyone at all) and comments that are not productive additions to the conversation will not be published, period, to make room for a discussion among those with ideas to kick around. Please read our Help and Feedback section for more info.